An Islamic State (IS) leader has been killed in an air strike in the northern Iraqi city of Mosul, residents and a local medical source say.

They said Radwan Taleb al-Hamdouni, who they described as the radical militant group's leader in Mosul, was killed with his driver when their car was hit in a western district of the city on Wednesday afternoon.

A source said Hamdouni was buried later on Wednesday with large numbers of supporters, some carrying black Islamic State flags, attended the funeral.

He had been the Islamic State 'wali', or governor, of Mosul, which was captured by the group in June and remains the largest city in a self-declared Islamic State caliphate straddling the border between northern Iraq and eastern Syria.

IS militants swept through northern Iraq in June almost unopposed by Iraq's army, consolidating gains made in the country's Sunni heartland region of Anbar.

The United States, backed by some Western and Arab allies, launched air strikes against the group in Iraq in August, later expanding operations to targets in Syria.

The air campaign, which Washington says aims to degrade IS's military capability, helped Kurdish forces retake territory from the group in Iraq and defend the Syrian border town of Kobane from an ongoing offensive.

IS fighters faced another setback this week when Iraqi officials said they had broken a five-month siege of the Baiji oil refinery – Iraq's largest – on Tuesday.